I'm an expert in business growth and overcoming organizational obstacles to success and a public speaker at conferences and management meetings on how to grow your organization. I'm a workshop leader for companies wanting to find their next growth engine, an author of "Create Marketplace Disruption: How to Stay Ahead of the Competition" (Financial Times Press), a contributing editor for "International Journal of Innovation Science" and a leadership columnist for CIOMagazine and ComputerWorld. I am a former head of business development for Pepsico and Dupont, consultant with The Boston Consulting Group and am currently Managing Partner for Spark Partners. Harvard MBA. Hail from Chicago.

Google - Why Things Will Get Much Worse - Sell

With revenues up 39% last quarter, it’s far too soon to declare the death of Google. Even in techville, where things happen quickly, the multi-year string of double-digit higher revenues insures survival – at least for a while.

However, there are a lot of problems at Google which indicate it is not a good long-term hold for investors. For traders there is probably money to be made, as this long-term chart indicates:

While there has been enormous volatility, Google has yet to return to its 2007 highs and struggles to climb out of the low $600/share price range. And there’s good reason, because Google management has done more to circle the wagons in self-defense than it has done to create new product markets.

Google is a product laggard

What was the last exciting product you can think of from Google? Something that was truly new, innovative and being developed into a market changer? Most likely, whatever you named is something that has recently been killed, or receiving precious little management attention. For a company that prided itself on innovation – even reportedly giving all employees 20% of their time to do whatever they wanted – we see management actions that are decidedly not about promoting innovation into the market, or making sustainable efforts to create new markets:

killed Google Powermeter, a project that could have redefined how we buy and use electricity

All of these had opportunities to redefine markets. So what did Google do with these redeployed resources:

Bought Motorola for $12.5billion, which it hopes to take toe-to-toe with Apple‘s market leading iPhone, and possibly the iPad. And in the process has aggravated all the companies who licensed Android and developed products which will now compete with Google’s own products. Like the #1 global handset manufacturer Samsung. And which offers no clear advantage to the Apple products, but is being offered at a lower price.

Google+, which has become an internal obsession – and according to employees consumes far more resources than anyone outside Google knows. Google+ is a product going toe-to-toe with Facebook, only with no clear advantages. Despite all the investment, Google continues refusing to publish any statistics indicating that Google+ is growing substantially, or producing any profits, in its catch-up competition with Facebook.

Google lacks a capability for taking innovation to market

In both markets, mobile phones and social media, Google has acted very unlike the Google of 2000 that innovated its way to the top of web revenues, and profits. Instead of developing new markets, Google has chosen to undertaking 2 Goliath battles with enormously successful market leaders, but without any real advantage.

Google has actually proven, since peaking in 2007, that its leadership is remarkably old-fashioned, in the worst kind of way. Instead of focusing on developing new markets and opportunities, management keeps focusing on defending and extending its traditional search business – and has proven completely inept at developing any new revenue streams. Google bought both YouTube and Blogger, which have enormous user bases and attract incredible volumes of page views – but has yet to figure out how to monetize either, after several years.

For its new market innovations, rather than setting up teams dedicated to turning its innovations into profitable revenue growth engines Google leadership keeps making binary decisions. Messrs. Page and Brin either decide the product and market aren’t self-developing, and kill the products, or simply ignore the business opportunity and lets it drift. Much like Microsoft – which has remained focused on Windows and Office while letting its Zune, mobile and other products drift into oblivion – or lose huge amounts of money like Bing and for years XBox.

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A rather bold headline. However I do concur that Google has made some pretty poor decisions over the past few years. Not only has it failed to effectively monetize Android, it went and bought MMI for billions in a defensive move to shore up its IP.

It’s huge reliance on Ad revenues is threatened not only by Facebook but also by the likes of Apple with its mobile ad platform. Samsung is already planning to build its own mobile ad platform and has partnered with Visa on NFC payments. Microsoft will go the same route.

That said its a large company with deep pockets so they can hopefully turn themselves around before its too late.

Good comment inmyview. I agree that the company has the resources to turn itself around a develop a very bright future. But doing that requires Messrs. Page and Brin change the projects they are resourcing. Google needs to create a capability for taking innovations to market, and invest in those innovations and new market development rather than chasing leaders in other markets where they lack game changers.

I totally agree that many of Google’s products have not set the world on fire as they perhaps should. However, I think we’d disagree on why.

In the early days, Google’s greatest successes came from the talents of great engineers. But for many years, it has felt like those same engineers have been doing all the customer facing design work on Google products, too.

Google products seem to have a hodge-podge of different design ideas behind them. They don’t hold together very well, and they rarely impress. Think of Wave (RIP), Gmail, Google+, YouTube, and hell, even the Google search results page these days: Lots of clutter. Not much magic. They don’t “wow”. (Yes, everything is compared to Apple these days – boring, but true).

Everyone knows, engineers aren’t regular humans. To protect the innocent, they shouldn’t be allowed to control user interfaces on stuff they build. Hire anthropologists or 70-year old technophobes or enhanced monkeys to do it. But not engineers.

To my eyes, Page’s efforts to shut down a lot of “fringe” products and to reign back on the “20% time” gig look like a sensible attempt to try and get control of the random product quality that Google has been producing.

Less quantity, Better quality, = “Fire for effect”. Whilst I agree many of the outward signs from Google are trouble (non-voting shares? What?), a commitment to higher quality seems like a smart move.

Good insight – I had not realized they were using engineers to design they UI. Explains a lot.

I too think there is are benefits of focusing R&D efforts but I am not as confident that the choice to throw all their eggs into personalized search is the best decision. It is another reactive move in response to the FB threat which they should have recognized years ago. In addition personalized search has significant privacy hurdles especially for Google which has a looser definition of privacy ( likely driven by said engineers).

Thanks for commenting Matt Hunter, and no one can argue with improving quality. But I don’t think that’s the strategic issue at Google. Rather it is an inability to bring the innovations to market in a way that better meets existing needs, or meets emerging needs no other competitor addresses. Many of the Google innovations showed real sparks of doing this, but they weren’t nurtured and developed into successful market changers. Instead resources are being poured into playing catch up in mobile handsets and social networking – without applying much innovation.

Great article. With the pending anti-trust issue (which is way past due) and and apparent vulnerability in Google’s algorithm (oh yeah – it is vulnerable), I would be very concerned about the future of Google.

What once was a do-no-harm approach has turned into an all out effort over the last 7 years to control website owners and SEO firms (I’ve been making money in search for ten years). It goes way beyond the products they’re developing – Google is first and foremost a search engine – diversifying is something they need to do, but for now, their core business is still search.

Unfortunately, because of how Google’s algorithm works, they have literally moved to an all out war in an effort to punish website owners for promoting their websites. Just check the stats – over 700K at last report by Matt Cutts, of emails sent to website owners by Google of “Unnatural” links – and that’s just the one’s they sent emails to – at the same time the website loses its rankings in Google – and business. (no, I have not received one of these letters)

I know of one website (Yes, a good friend of mine) that nearly 3 years after receiving that email, has yet to recover his 1st page rankings. Why did google penalize the site? He was asking for one way links from the same websites (called backlink analysis) his competitors were linked from. One of those sites happened to be owned by someone that was friends with Matt Cutts of Google – Imagine that.

I’m not going to say that Matt personally penalized that website, but what I will say is that website was indeed penalized by Google for nothing more than trying to get other website owners to link to their website. There is something seriously wrong with Google when you punish business owners for trying to promote their business for organic rankings in Google search.

Do No Harm… A shame.. Google has really changed over the last 7 years.

Thanks for your comment George Chaney. I avoided digging into the technical aspects of Google – such as the algorithm – in my article. It was good of you to update us with this info and your opinion as a web developer, site owner and SEO customer.

Couldn’t agree more. Unfortunately, the stock-split which retains and consolidates control by the founders [who created search] may not be the best mechanism to “let go of its comfort-zone” [which is in search].